Case Study On Strategic Analysis Management Essay

Case watch On Strategic Analysis Management EssayThis go out be d oneness by dint of and by analysing the revolution stores application in which Woolworth operates, the connections past, present and emerging offshoot strategies and its current performance. Using knowd strategic tools, the various options on tap(predicate) to the follow will be recommended and evaluated.METHODOLOGY The Methodology that will be employ to compile this dissertation will main(prenominal)ly be in the form of secondary research. This is largely beca hire the record of the bug out requires the co-operation of managers at real(a) strategic level of the guild. The Managers chthonicstand and countenance sufficient randomness on the strategic direction of the organisation. The source was un up to(p) to ar cooking stove interviews with the management in the company, as information they ask give the bounce non be do public for private tenabilitys. As a result it is deemed that the inform ation gathe bid from spic-and-span(prenominal) sources in spite of appearance the company would non be as reliable as want for this topic. Informal primary research interviews will be ar ordaind to bring dwelling the bacon general information on Woolworths PLCs policies and operations with members of Woolworths store staff.Secondary information will in addition be used to compile this dissertation overdue to the availability of reliable and valid information on Woolworths PLC and the variety retail industry. Secondary research will be conducted through examination of one-year reports and accounts of the company and its main competitors. To evaluate these, sources such as Mintel Marketing intelligence operation Reports and Marketing and Business affair journals will be used. Published pedantic books on Strategic Management will overly be used to assist with the theoretical elements of this dissertation.HISTORY Woolworths is chiefly described as a variety store. Thes e ar organisations that concentrate their efforts on the retailing of a range of products in the patheticer and more popular determine ranges. They grant a walk in, shop and carry facility as the major thoroughf be of purchasing (home delivery and pre ordering macrocosm r atomic sum up 18), with open display and self-service merc muckleising. They atomic number 18 un probably to be sectionalised. Other related categories let in department stores, discounters and specialist shops ( too kn proclaim as category killers) (Oxford English Dictionary 2001).Woolworths was outgrowth established by Frank Winfield Woolworth in 1879 with the concept of exchange products personify no more than 5 cents. This proved a popular thinker with the consumers and the turnover continued to grow. The concept was of no frills shop, with a range of poor priced, non-perishable items. When F.W. Woolworth died in 1919, he had built an empire of 1,081 stores with gross revenue in sp be of $118 million per year (Faulkner et al 2003). The company continued to grow and create internal competencies in atomic number 18as such as tradeing, finance and estates management (Faulkner et al 2003). Faulkner et al also comment that this period of Woolworths history was characte deepend by the focussing of its dodge it was able to deepen its existing competencies and incrementally expand both(prenominal) its qualification base and it fellowship of antithetic commercialise environments (such as suburban retailing) (Faulkner et al pp. 279 2003).However, this was to prove insufficient when discounters and category killers became more rife in the food marketplace. Wal-Mart had begun commerce in general merchandise at low prices and specialist retail merchants, such a Toys- R- Us renderd a destination shop location for those consumers pursuit a particular product, a wider range of products or specialist k at a timeledge nearly the products. Woolworths began a decline in sal es in real terms due to its lack of insight of how to capitalise on the prevalent retail preferences. They failed to exhaust the move to expand their employment either into a wider focus or a narrower one, strategies which would lease given them a weapons platform from which to arrogate on their competitors.It wasnt until the late 1980s that Woolworths changed their dodging in the coupled States with their diversification into specialist argonas, such as Kids Mart and Little Folks, as well as put plentying the discount retail line of work with the Woolco concept. However, they lacked the competencies and capabilities to pay back up for the time they had lost which had allowed their competitors to establish a strong market lead and in 1995, Kids Mart and Little Folks both un kindly down. This was on top of the closure of 400 stores in the USA and the sale of 122 Canadian Woolco stores to Wal-Mart (Faulkner et al 2003). One of the specialist areas they had entered into, fo otwear, did prove to be a achiever and led Woolworths in the USA to open over 7, 000 gymnastic footwear stores covering a range of gender and age segments by 1998. The company decided at this stage to change its operating ca-ca in the USA to the Venator Group (Faulkner et al 2003) and to reposition itself as a specialist sports footwear retail merchant.The groups business in the UK moved in a different direction and kept the original company name. At present, in the UK, Woolworth presently owns around 900 stores selling toys, confectionary, house wares, seasonal products and electronic entertainment. The UK business has also moved into specialist areas with the introduction of MVC home entertainment and electronics which currently has 85 shops, E.UK, which is the largest distri besidesor of home entertainment products in the UK, and the harmony and television publishing arm VCI (Cornell date unknown). Having become a public company in 1931, Woolworths was briefly taken over in 1982 by Kingfisher, besides returned to public ownership a get to in mid-2001.Woolworths stated aim is to be at the heart of the community and the best loved retail merchant for kids, home and family leisure (www.woolworthsgroupplc.com).As will be seen Woolworths performance has been variable over recent years and in January 2005, they matchd a takeover press from the private equity group, Apax. Although the Woolworths board rejected that house, a higher one was received four weeks later and is currently under consideration. This means that the future tense for Woolworths is an uncertain one, with the possibility of a substantial cash injection, but modest control for the current management team. Should the Apax offer be rejected again, Woolworths is likely to receive offers from its major competitors. PORTERS FIVE FORCE ANALYSIS.Threat of new entrants disdain the high number of retail merchants dealing with general merchandise, two areas are seen as being specially rel evant.Currently, at that place are only two catalog based shopping concepts in the UK, Argos and Next. This market stays highly under-represented considering the success particularly of Argos and it could be frame in uped that the concept will be taken up by more companies in future. These businesses offer the full range of house wares, electrical goods, toys and gifts as available from Woolworth, and have a clear-cut agonistic advantage in their practice of minimal stock holdings in store allowing excess selling space to be released. They whitethorn baptistery difficulties in finding the number and coat of locations they would adopt to become a major player in this market, but this could be overcome through the acquisition of an existing retailer.Further new entrants may be seen as foreign companies try to increase their market share. These have already been seen in two main forms. Firstly the specialist retailers who started from nothing in the UK and have achieved good organic growth. Examples include Toys-R-Us, Ikea, Gap, HM, Beneton and Poundstretcher. The second group are those who gain a foothold in the UK market through acquisition. These include Wal-Mart, Brantano and Claires Stores. thither is no reason to expect the level of foreign retail concerningness in the UK to decrease.Bargaining power of suppliersThe bargaining power of suppliers has been more diminished with the development of e-commerce. Because of the vast increase in access to information surrounded by potential suppliers and buyers, the suppliers set strategy may be the only agency to bushel business. This is likely to increase as more use is do of the Internet. One recent development has been the practice of reverse auctions where a retailer specifies what they want and competing suppliers out call forth each other, via a web site, by lowering the price rather than by raising it as in the traditional auction (www.gusplc.com).Once suppliers have been agreed, the larg e size of this retail sector also ensures buyers potentiometer act from a strong negotiating base, as they have signifi buttt control over the future health of utilise suppliers. Recently there has been packaging around the practice of large retailers climb what are seen as unfair terms with suppliers and of insisting on price reductions even though the supplier then operates at a redness (Telegraph 2005). However, it is not expected that any legislation will bring about changes in this blank space in the foreseeable future.On the negative side, specialist suppliers such as those render mobile phones and computer games, have an change magnitude amount of power due to the demand for their products. A retailer would need to ensure they have sufficient quantities of a product such as the latest Playstation, for the Christmas market, but are frequently left in the transfer of suppliers who can give preferential service to other clients.Threat of substitutes produce substitutio ns can be used in two different ways. Firstly, as is the strategy of many of the main supermarkets, own brand labels are seen as acceptable substitutions for everyday grocery items. The court of substitution is low to the node i.e. they feel that there is little jeopardize because of the loyalty they have to the store. The other type is through introducing higher priced, luxury type items. This strategy can be seen in the mark and Spencer food sector where they market the products as being superior to other brands.For the variety retailers, the concept of substitution does not await to have been fully exploited and it is a possible strategy for securing market share in the future.Bargaining power of customersThe high level of competition amongst retailers has led to a position of power for the consumer. Having moved from seasonally driven sales events to permanent deals, the aggressiveness of these approaches has also increased. Customers now expect to be able to get three for two offers throughout the year. This puts the retailer at a disadvantage, as they will lose the potential benefits of targeting selling promotions and means they are continually forced to take the path of belligerent pricing. This can lead companies to over rely on the profits make from a limited range of products whereas the rest of the ranges operate at unsustainably low profit margins as loss leaders.Competitive rivalry in spite of appearance the industryThe variety stores sector is highly agonistical and there is no reason why this should not continue to be the guinea pig. It is suggested by retail analysts, Peters, Elworthy and Moore, that the variety store business in the UK has become saturated and that the larger stores are likely to take over or merge with the in myrmecophilouss (cited in Potts 1996). argument from superstores and supermarkets is expected to increase as they add to their ranges of non-food items in a bid to gain a higher share of the overall consumer market (Potts 1996).It is also expected that the differentiation between department stores, variety stores, home shopping and supermarkets will become less sharp as retailers look to successor grooves and increasing product ranges to maximise their turnover (Potts 1996). This will trougher it difficult for new entrants to enter the market unless they benefit from a unparalleled selling point such as discounting, as has been seen with companies such as Wilkinsons.PEST ANALYSISPoliticalEcological/environmental issues- corporate favorable responsibility (csr)- The main belief around csr thinking is that the practice of businesses within the capitalist economy to concentrate their efforts on providing wealth for its shareholders, is unacceptable and that companies should take the responsibility of considering the well being of society as a firm (The Economist, January 22nd 2005). It has been countered by Lynch that failure to make a item statement on ethical issues, does not mea n that a company is not fundamentally ethical in the way that it does its business (Lynch 2003).Retailers generally are coming under increasing wedge to ensure they cannot be charged with poor practices with regard to the developing world or the environment. The activities of and publicity around the anti-globalisation movement, may dissuade organisations from expanding their markets abroad, although many see these as a small minority and it is questionable as to whether their activities would cause a company to alter their strategy. It is more likely that they will take the issues into account in terms of having a robust csr policy and when reporting to the media. Woolworths made the interest statement on csr in their latest financial statement During 2003/4, through the CSR Committee, Woolworths Group has continued to work to understand the mends, both incontrovertible and negative, of our business.A proper understanding of the risks we must manage and the opportunities we hav e to be a catalyst for improvement is a fundamental part of how we do business (www.woolworthsgroupplc.com). Woolworth has specific policies on the areas of timber and chemical usage, a strict recruit of ethical trading and has set up its own charity (Woolworth Kids First) to provide the hazard for their employees to help children on a local basis (www.woolworthsgroupplc.com). Whilst Woolworths are outwardly taking their csr seriously, it is an area that has come from nowhere to heavily equal organisations in the past and Woolworth would do well to bear in listen the impacts on Nestle of the baby milk episode and on Marks and Spencer of the sweat shop issues.Legislation- a new White Paper has been denote that will give retailers the ability to offer legal advice through their own law companies. Dubbed Tesco Law, it provides a further service to encourage the one cylinder block shop approach of the large supermarket ambits (BBC D). Supermarket chains, which are one of Woolwort hs main sources of competition, have had a strategy of offering a one-stop shop probability to their customers with the introduction of such facilities as pharmacies, banking facilities and insurance. It is not yet known whether Woolworths is mean to introduce such offerings in its store.Government policies- in the recent budget, Gordon embrown announced a doubling of the threshold for stamp duty on house purchases to 120,000. This was done to assist particularly first time buyers. supporting(a) the lodgement market will have a beneficial subject on Woolworths house wares, furnishings and DIY ranges, but this will obviously extend to their competitors as well.Government term and change- whilst a General Election is due in the UK, the writer believes that there would be no significant impact, either substantiative or negative, were the political party currently in power were to remain or change.EconomicHome economy situation- the current frugal situation in the UK can be seen as a positive calculate for Woolworths with low interest rates (2.7%) and high property cling tos leading(a) to record levels of borrowing. However, there are concerns over the level of borrowing as debt levels for have reached more than 1 trillion (BBC E). It should also be renowned that low interest rates would dissuade people who are financial support off investments from spending, although these tend to be those in retirement who are not considered to be Woolworths target consumer. They have identified that their typical customers are mothers with dependent children living at home(www.woolworthsgroupplc.com).Home economy trends. The Government states that Council tax will rise by an average of 4.1% in the next financial year, the last(a) increase in more than ten years (BBC B). In the housing market, figures for changes in house prices vary by source with the Halifax quoting a 0.5% rise and the Nationwide a 0.5% fall (BBC A 2005). There is currently no solid evidence of a crash in the housing market. Should this occur, the impact on the whole retail industry would be immense.Overseas economies and trends- fossil oil prices had risen to a high of $56.15 per barrel in mid show (BBC F). Although they are currently falling, they remain 25% higher for the year (BBC F). keen-sighted term, the situation is likely to worsen as demand for oil increases from ontogeny economies such as China, where the economy is growing at 9% and a 10% increase in oil use is predicted for 2005 (BBC F 2005). uplifted oil prices will affect both product and distribution cost for all retailers and will have to be passed onto the consumer through increased prices if demandion savings cannot be made in the apprize chain.Market and trade cycles- despite good economic factors such as low interest rates, the UK retail economy seems to be slowing down. In March Morrison, Boots and Jessops put out profit warnings and it was reported that data suggests generally poor retail sal es and weak spending for the period since Christmas (Verdin 2005). The figures point to a growth in consumer spending of only 0.2% for the last quarter of 2004 the weakest figure for intimately two years (Duncan 2005).No specific cause for this downturn has been identified although the writer would suggest that the publicity around levels of personal debt and the worsening pension crisis may have most influence.SocialConsumer attitudes and opinions- Mintels annual lifestyle report has shew that consumers are shunning the larger supermarkets and chain stores which they find impersonal, and are much more likely to frequent local, independent shops (cited in BBC C). The implications of this for Woolworth could be positive or negative. To many people, they may be classed as a multi-site retailer and therefore avoided by the consumer. However, the history of the company, its generally high street locations and the nature of the products it sells may lead some to choose it as a shoppin g venue over large supermarkets. In this area, the history and reputation of Woolworths can only be beneficial.Fashion and role models- the value of celebrity visage is well understood by the retail industry and icons such as Jamie Oliver, Delia Smith and David Beckham have all become associated with particular brands. Woolworth identified this manakin and adopted the puppet characters, Woolly and Worth, for their 2004 Christmas campaign. Its success has encouraged them to continue the use of these characters for future advertising campaigns (www.woolworthsgrouppls.com).Technology- the rate of increase in use of track edge applied science based items has given retailers a highly moneymaking new product range. For congresswoman, mobile phone engineering only became widely available in the early 1980s, but today, approximately one in six of the worlds population owns one and in virtually of the developed countries, market penetration exceeds 70% (The Economist 2005). As well a s the phones themselves, the associated hardware and software are highly popular and unexpected markets have developed, for example, ring tones. There are no indications that these products will do anything other than watch their growth and the continual developments in technology help to keep the market buoyant.Consumer buying mechanisms/technology- the growth of e-commerce has provided two new strategic directions for retailers. Firstly, there is the opportunity of selling the technology itself- mobile phones, personal computers, software, downloads, games- and secondly, it provides a further channel through which to sell goods. All the major retailers have web sites on which customers can research products, compare prices, order and pay for goods and, as such, there is reasonable competition to encourage consumers to visit particular web sites. An extra dimension is the number of companies who sell only through the Internet. This provides them with a competitive advantage of ha ving lower overheads as premises and shop floor staff are not required.A good example of this is the book retailer Amazon.com who have diversified into tog, apparel, DVDs and compact discs following their success with books. Further transmit have yet to be fully utilised including ordering goods through mobile phone technology and digital television shopping channels. Whilst structure their e-commerce business, Woolworths need to ensure it is based on a stable and secure foundation. Although not alone in the experience, they had to close their www.woolies.co.uk site for two months in 2000, when a customer reported that they could view other peoples credit beleaguer details on the site (Azeez 2002).Maturity of technology- Radio Frequency individuality Tagging (RFID) is seen as the way forward by many retailers who are project trials of the technology. The most well known is probably Tescos who have been testing it on their high relative value, easily portable items such as razo rs. Woolworth had been trialing systems but has announced this year that there is no longer funding for the project (www.woolworthsgroupplc.com). They are allowing the technology to reach maturity and should then be able to capitalise on the research done by others. There are some risks with this strategy as it gives the competitors the opportunity to realise the benefits of such technology at an earlier stage. However, it also protects Woolworths from the high level of risk associated with this technology and dealing with issues raised by the Data Protection Act.STRATEGIC assembly ANALYSIS. The competitors of Woolworth are deemed as being Discounters those stores which offer stock at particularly low prices and have this as a unique selling point. These would include Wilkinsons, Asda-WalMart and Poundstretcher Supermarkets stores that historically sold predominantly food items, but have now generally expanded their range to include substantial non-food categories. Examples are Tes co, Sainsbury, Asda-WalMart and Waitrose plane section stores a store which sells a range of items, usually non-food, that divides its goods into distinct areas of the store. In the UK this category includes MS, Debenhams, House of Fraser, British Home Stores (BHS), and John Lewis Catalogue stores the retailer has a large proportion of the store space dedicated to storage rather than selling space. Few, if any goods are on display and customers select from a catalogue, usually without viewing the product first. Argos and Next are the most well known in the UK. Specialist stores those who concentrate on selling a particular product, which corresponds to part of the Woolworth range. For example, Mothercare and the early Learning Centre for childrens clothes, BQ, Homebase and focalisation DIY for DIY products.Competition is high for all segments of the retail industry which has lead to a blurring of the differences between the categories. Many companies are diversifying into new se ctors or aiming for higher market penetration in their existing products. A good example are the supermarkets which have had many years of fierce competition with the main three, Tesco, Sainsbury and Asda, regularly changing places in the retailer league. Their strategy involves adopting a hybrid approach. woo leadership to some degree by ensuring they maintained competitive pricing for generic products and then offering their own brands at a importantly lower price and differentiation in terms of the range of products they offer by branching out into greater ranges of non-food items. New entrants to the market had to have a unique selling point to spell to the consumer and found it in terms of outperforming the established market in cost leadership. Aldi, Netto and Lidl have achieved some success in this, providing generally unfamiliar brand named, everyday products at a significantly lower price than the main supermarkets.The supermarkets also attempt to increase their market share through increasing their ranges of products and increasing the size of their stores to include superstores and hypermarkets. Other tactics include offering an appearance of being more exclusive (such as Waitrose and Marks and Spencer), lay as a leader in corporate social responsibility (as in the Co-Operative stores and their Fair-trade products) and seeking new selling opportunities (for example, Marks and Spencers food outlets in service stations). The unification of Asda and WalMart and Morrisons and Safeway showed that some of these strategies left companies with no clear customer focus, trying to be all things to all people, and, with decreasing sales and market share, they became attractive propositions to companies need to achieve a foothold in a new geographical location (the south of England in the case of Morrisons and the whole of the UK in the case of WalMart).The biggest threat to Woolworths from these stores has been through product diversification. Initially seeking to offer a one stop shop experience, with selling general merchandise, they then took on specialist stores such as Lloyds pharmacies, and non-retailers with the offerings of financial services.The specialist stores have had to recognise that as well as competing between themselves where products overlap, they are now also having to take on the supermarkets. Music retailers, such as HMV and Virgin, are experiencing pressure from supermarkets, who area able to take them on in terms of cost leadership due to economies of scale and value chain efficiencies, leaving the music stores with the only option of maximising their niche qualities. However, the increasing popularity of e-commerce, both in terms of new retailers and innovative product formats (such as downloads), has put this strategy at risk as their niche status is coming under attack. The implications for Woolworths high street stores are that they are having to rely on appealing to customers who are not seeking a spec ific item when they enter a store, as they cannot compete on grounds of price or specialism. Their appeal is to the impulse purchaser or those who are buying for mortal else and are unsure of what they want. This merges well with the Woolworth strategy of concentrating on Kids and Celebrations. However, if they are positioning themselves as a one stop shop provider for jubilancy events, they are still in competition with the supermarkets who are able to provide the same items and the opportunity to purchase them whilst doing the regular grocery shopping.In areas where Woolworth has traditionally been seen as a key provider, childrens clothes, again, the supermarkets are offering a cost leader alternative with a strong fashion selling point, by employing well-known designers to support their products (such as George at Asda). Tesco recently showed their power by offering Levis jeans at a price point lower than the manufacturer. conjugate with this is the strategy of other companie s to move into this line as a new product or to increase their market share. Key players are Mothercare and The Early Learning Centre. Seen as specialists for the child market, their threat to Woolworth is significant as is that of clothing retailers identifying the market for childrens clothes and exploiting it using their strength in reputation to appeal to the consumer (Gap Kids for example).Whilst all these forms of retail outlet vie for the consumers business, there is an inherent risk for all of them in terms of being able to convert their sales into profit. With competition being so fierce and coming for several different directions, most retailers have to ensure that whilst they are not necessarily the cheapest, they are competitive. The exceptions to this are those that promote themselves as exclusive, such as Waitrose. All these retailers are seeking to mow their cost through driving savings with the value chain. This has wide reaching implications. As pressure increases to produce the goods at a lower cost, the source of production moves to countries with lower wages and poorer working conditions. As well as affecting the UK economy through increased unemployment, there have been cases where the apparent violation of human rights has produced poor publicity for the retailer. An example of this is the situation Marks and Spencer encountered in the late 1990s.On the one hand they were being accused of being too expensive, so they moved production of their clothes to developing countries. This led to an outcry in the media when companies in the UK who had been supplying them for years, could no longer operate and had to close down.Another strategy to reduce production costs is to use cheaper raw materials, but again, the negative aspects of this receive attention, with the current example being the questions raised over the nutritional value of cheap food products.Within the organisations themselves, streamlining head office personnel in terms of numb ers and outsourcing support functions such as recruitment, have shown to be effective in the short term, but the long-term effects of not bad(p) costs in areas such as research and development and cookery has yet to be seen.SWOT ANALYSIS.StrengthsMany of Woolworths strengths come from its long history. They have a recognised internal competence in supply chain management and are able to use this both to reduce their costs and to enter into agreements with organisations that would traditionally be classed as their competitors, such as Tesco. They are using their expertise to provide additional turnover. Their contracts with other companies that utilise their strengths also allow them to minimise the risks to themselves. Having been long established, Woolworth has a good reputation in the UK and is a recognised name on the high street. They have a strong presence in toys, house wares, confectionary and seasonal products markets and due to their size can boast a dominant position ove r the legal age of their suppliers.The perception of consumers is of a high level of corporate social responsibility, having not been subjected to significant poor publicity in any areas. The general economic conditions in the UK are promising although the recently reported slow down in consumer spending must be regarded as a risk. The locations and number of stores operated by Woolworths can be seen as a further strength, especially as consumer preference moves away from out of town shopping. They have made a good move in the adoption of advertising icons, which are considered to be a key element of their marketing campaign. Recent improvements in their stock management systems involving the introduction of an integrated replenishment system and the Kingstore till systems, gives them the ability to manage their stock levels more efficiently, thereby reducing both costs and instances of stock outages.They have undergone a recent review of how they can improve their operational effi ciency and this shows a proactive strategy to take on their competition. They have a high level of understanding of customer base which they have developed through their long history in the retail market. This enables them to predict changes in consumer requirements and gives them the potential to maintain a competitive edge. Their decision to increase their use of their own brand products gives them the opportunity to kindle their market penetration in these areas, whilst their expansion of electronic entertainment offerings shows a desire to widen their range within a specific sector. These strategies seem to be successful at present.